PROBLEM 1 - Make or Buy: XYZ Corporation uses a part called RGS-78 in one of its products. An outside supplier has offered to make the part and sell it to the company for $27.00 each. The company reports the following average costs when the company produces 6,200 units. Average Cost Per Unit Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead $ 7.60 $ 4.20 $ 8.30 $ 3.20 $ 2.70 $ 1.40 The special equipment has no other use. It cannot be sold due to its special nature. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5,000 of these allocated general overhead costs would be avoided. The space used to produce GX29 could be rented to another company and earn rental income of $17,000 per year. What is the financial advantage (disadvantage) of accepting the outside supplier's offer? (Show your work). Do you think the company should make or buy RGS-78? Why